India Natural Rubber: Mixed trend in spot; bullish in futures

Last Updated : 10 October 2012 at 09:10 IST
KOTTAYAM (Commodity Online): India natural rubber witnessed mixed trend in spot markets and bullish trend in futures on Tuesday.

RSS 4 variety of natural rubber was traded at the rate of Rs.191/Kg even as RSS 5 was seen trading at Rs.187/Kg. Ungraded rubber was traded for Rs.180/Kg.

There have been no rains and tyre companies are not participating in trade, sources said.

“Still information suggests that they purchase natural rubber in anonymity. They don't give much of publicity in this regard. Given that prices are ruling low in natural rubber in the international markets, there have been no exports happening.” a trader informed.

Meanwhile, in the spot markets on Monday, RSS 4 variety was traded at the rate of Rs.192-193/Kg and RSS 5 variety at Rs.187/Kg. Spot close price-- the price according to close of trade that is carried out at the fag end of the day; at 6.00 pm or after-- ruled at Rs.190/Kg and Rs.186/Kg on Monday. The overall trend had been bearish in spot for that day.

Tuesday Futures

Rubber futures on the NMCE opened at Rs.18140, touched a high of Rs.18796, a low of Rs.18410 and closed at Rs.18249. Meanwhile, NMCE natural rubber ware house stocks as on Monday is estimated at 7 tons.

“Some buying in natural rubber futures may occur in coming sessions. From current levels, Rs.18150 looks good support for the week while Rs.19200 is the resistance for the same. Trend appears to be bullish in futures.” our in-house analysts said.

Global trends

Natural rubber prices witnessed mixed trends in global market as weak crude oil prices dampened market sentiments while supply curbs by leading producers, Thailand, Indonesia and Malaysia continues to provide positive support to prices.

At Tokyo Commodity Exchange, benchmark March contractrose 3.7 Yen in day session to 273.8 Yen per kg but fell back to 271.6 Yen per kg as International Monetary Fund (IMF) lowered forecast for economic growth.

US WTI crude oil futures remained weak at $89 levels which is not supportive of natural rubber.

In India rains have weakened in the key growing region of Kerala state in south India and production has intensified while tyre sector is not an active buyer in the market due to prevailing Rs 15-20 per kg price differential between Indian and global prices.

As published in: http://www.commodityonline.com/news/india-natural-rubber-mixed-trend-in-spot;-bullish-in-futures-50786-3-50787.html

Solving the data puzzle on India natural rubber fundamentals

Is the Indian Rubber market facing acute shortage of natural rubber?

Is there any problem with the statistical methods that India Rubber Board employs to calculate stocks?

As per the latest figures available with India's Rubber Board, June-end surplus stocks—or stocks that are available for July with traders—stands at 190312 metric tons.

Meanwhile, the anticipated production figures for August and September are pegged at 71200 tons and 80200 tons respectively. Consumption for the same months are estimated to be 77000 tons and 74000 tons.

The table tells that the excess requirement for the month of August and September stands at 5800 tons and 6200 tons respectively. Imports—block rubber and sheet rubber—for the months stand at 17605 tons and 9100 tons. While the scenario of excess demand fades in August due to aggressive imports at 17605 tons, excess demand for September is expected to be at 2900 tons.

Now, as slowdown takes over the global economy, sluggishness is visible with consumption of rubber in offtakes down to 74000 tons for the month of September.

Though data to this end is yet to be made available, one can safely assume that with July surplus at 190312 tons, coupled with global slowdown denting demand, the requirement would be lethargic.

Result: Surplus Rubber in the country

(Quantity in tons)



Addressing the second question: it is often held by industry bodies like ATMA(Automotive Tyre Manufacturers Association) and AIRIA(All India Rubber Industries Association) that rubber board is making a serious statistical error in calculating the stocks in country; that board is taking into account even the already sold stock which is the inventory of various manufacturing companies.

But, as long as natural rubber is kept as it is, as long as natural rubber is not converted to end-product, the board has no other options; but to follow the current methodology in tabulating stocks.

And the Board is providing stock figures in a segregated form in its statistical news bulletin published every month which is available online.

So, the conclusion that Board's 'erroneous' figures may affect policy prescriptions holds no water.

As published in: http://www.commodityonline.com/news/Solving-the-data-puzzle-on-India-natural-rubber-fundamentals-43105-3-1.html

Rubber: Indian branding efforts set to conquer markets

Back in February, in a major branding exercise, India’s Rubber Board had unveiled a quality certification logo for natural rubber that was expected to increase the acceptability of ‘Indian Natural Rubber’ in the world market.

Now, with 3000 tonnes of branded natural rubber-- Indian Natural Rubber-- being exported since February (that forms 35 per cent of the total rubber exported during February - August period this year); Malaysia and China, world's largest consumers of natural rubber, are interested in importing from India.

“India may only be the fourth largest producer of natural rubber. But, unlike India, the top three producers have not opted branding of natural rubber” said Binoy Kurien, Deputy Director, Marketing, India Rubber Board.

No doubt, this initiative of Rubber Board has given the country a lethal edge in international markets!

Indian Natural Rubber
Across agri-commodities, natural rubber (NR) is the one that finds industrial use like no other. Being a listless piece of enormous flexibility carrying a pungent smell, natural rubber has to ultimately find its abode in one or the other of industrial products. And since natural rubber goes to the industry, if it has a tag of identity to it, chances are better that it would find acceptance among industry players.

While this could be a philosophical approach there are reasons why it makes sense to brand natural rubber from India with logo and certification:

--Value creation across the natural rubber value chain

--An endorsement from the mandatory body that regulates the activities in natural rubber production in a nation that is the fourth largest producer of the same.

--An identity for rubber produced by countless faces toiling in plantations in rain and shine

--Instilling confidence in international buyers

--Providing stake holders with premium rates and helping farmers with lucrative prices

“All natural rubber exporters who are having valid Registration Cum Membership Certificate to export rubber from India can register with the Board for using the brand “Indian Natural Rubber”. The exporter shall pay a registration fee of Rs. 1000/- (one time) for using Indian Natural Rubber Logo on their products viz., RSS, ISNR and latex grades.” says the information from http://www.indiannaturalrubber.com

Apart from this, exporter will have to execute a MoU with the Board on the terms of logo usage. This will cover all the technical aspects, an export shall have to bear, while using the brand. Besides this Board will levy a logo usage fee for each kilogram of natural Rubber exported using logo.

The exporter has to grade, sort and pack the rubber as per Green Book/BIS specifications and seal individual packs with logo sticker and to inform “Export Ready status “for inspection.

Rubber Board will arrange inspection and draw samples for quality testing.

However, the usage of INR logo exporters is purely voluntary.

The Rubber Board is planning to introduce Indian Natural Rubber with fan fare in trade fairs and other gatherings starting 12th five year plan.

So who are the buyers of branded natural rubber?

“All who cares to buy!”, snapped Binoy.

Encouraging response from rubber manufacturers
The domestic manufacturers of rubber have shown encouraging response to branding initiatives floated by Rubber Board.

“There are about 50-55 active exporters for natural rubber in India. Amongst them, 35 exporters have opted for brand registration.” Binoy said.

“The encouraging fact is that those who export branded natural rubber are receiving repeat orders in the same category. This is because, the brand in itself is a quality assurance and where the negotiations were otherwise used to be focused on factors other than price (like quality), branding has changed the scenario by providing assured leg room when it comes to quality.” he added.

“There is virtually no risk: 99% risk has been contained by branding assurance.” Binoy elaborated.

What if players like Indonesia and Malaysia too come up with their own brands?

“We are having a forerunner advantage. Assured quality that comes through branding has cleared the stigma previously attached with Indian rubber. Also, other nations do not base them out of an organized playing ground. Unlike India, they lack a coordinated approach when it comes to natural rubber.” He said. “Their efforts are more or less individualistic and scattered”, he added.

Indian Natural Rubber can be touted as an umbrella brand, under which many private brands could flourish, Binoy continued.

“There are certain private players having their own brands in natural rubber. But, ‘Indian Natural Rubber’ can act as an Umbrella Brand and accommodate all these players under it.”

As published in: http://www.commodityonline.com/news/Rubber-Indian-branding-efforts-set-to-conquer-markets-42417-3-1.html

Stretching rubber beyond Kerala: Maharashtra the next hotspot

KOCHI, INDIA (Commodity Online): Kerala has long been a potent source of natural rubber in India. In fact 90% of India’s natural rubber output comes from Kerala. But analysts argue that the plantations in Kerala have reached a saturation point. And this has prompted India’s Rubber Board to seek land outside Kerala, where rubber could be cultivated. North Eastern States like Tripura, which has climatic conditions akin to that of Kerala were focused initially. But eventually, other States with potential for rubber cultivation were discovered: Maharashtra and Goa.

In the 1960s, ‘trial runs’ were carried out in Maharashtra and Goa for analysing the potential of natural rubber. In 1979, under the New Planting Scheme, regions were identified in Goa where rubber planting could be carried out.

Latest figures sourced from Rubber Board inform that there are 220 holdings of natural rubber in Maharashtra and 195 holdings in Goa. Together they account for 415 holdings of natural rubber.

In Maharashtra, 900 ha of natural rubber are planted while in Goa, 700 hectares have been planted rubber. Of these, 100 hectares in Maharashtra is mature area or worthy of tapping while in Goa this figure is at 650 hectares. Goa yields 900 tons/year; an average 1400 kg/ha while Maharashtra yields 200 tons/year; an average of 2 tons/ha.

Almost 60% of Goa rubber trees have grown old and needs re-plantation while in contrast, Maharashtra rubber trees are relatively young; which explains their enhanced yields.

In the ensuing five years, the Rubber Board has decided to plant 2500 ha of rubber in new planting in Maharashtra and 500 hectares of replanting in Goa. This totals about 3000 hectares.

With 10,000 ha of land recognised as having potential for rubber cultivation in Sindhudurga and Ratnagiri districts, unconfirmed sources peg Maharashtra rubber cultivation acreage potential at 50,000 hectares!

However there are hurdles to be cleared which are embedded within the system: the land rules.

“Currently, according to the law of land, in a Hindu Undivided Family system, consensus among the family members is vital for starting off with an activity in a land owned collectively. Without the consent of all the members, it would be difficult to start off. But with a string of generations owning the land, it would be difficult, if not impossible to trace each and every link in the family and earn their consent, who invariably would be scattered. Sometimes, the consent would be required from about 60-70 people.”—said a Rubber Board official.

Further, in Maharashtra, only farmers are entitled to buy agricultural land.”Unless you can prove that you are a farmer, you will not be able to buy agriculture land in Maharashtra; however rich you may be...” added the Rubber Board official.

In Maharashtra, rubber trees need additional care in the form of irrigation and fencing. Private nurseries in rubber are also missing.

In Goa too, there are stumbling blocks in the form of Tree Preservation Act.

“In Goa, if you have to cut down a tree, you not only need the consent of the government, but also furnish a chalan of Rs.300/ tree. Only, cashew and coconut are exempted from the rule. This law acts as a deterrent when it comes to replanting rubber (which involves cutting down rubber trees and planting new ones)...” the Rubber Board official explained.

“We have requested the state government to also exempt rubber from the ambit of Tree Preservation Act.” the official said.

“The Rubber Board is only a facilitator. Policy decisions have to come from the governments.” the official concluded.

As published in: http://www.commodityonline.com/news/Stretching-rubber-beyond-Kerala-Maharashtra-the-next-hotspot-39913-3-1.html

Four factors that may weaken natural rubber prospects

There seems to be a weird correlation between climate and markets! Following a simmering summer, monsoons are finally here. And after a spell of heated activity, markets are cooling heels. But with global uncertainties looming, many fear a frost bite!

Yes, given the trends and data that we observe and analyse, natural rubber prices are expected to weaken in the coming months with a slew of factors playing out.

Given below are those four factors and how those factors will impact rubber prices in the coming months, especially in India:

Factor 1: Crude oil

With the global economy slowing down and OPEC mulling a production quota hike, crude oil prices would come down in the coming months. This would also bring down the prices of synthetic rubber which is often used as a substitute for natural rubber. Naturally, synthetic rubber would replace natural rubber in a limited way curbing the natural rubber demand.

Ultimate Result: Natural rubber prices would come down

Factor 2: Automobile demand

Of the 18 passenger vehicle manufacturers in India, 12 who account for 90% of sales, reported sales figures jumping by a paltry 8% in May, compared to 14% in April, said a report in bsmotoring.com. Buyers prefer to check spending even as inventories pile up.

Increased borrowing rates and surging fuel prices play the villainous role here. (Even if the fuel prices drop, chances are less that interest rates would drop immediately, as inflation is driven by multiple factors; further, oil marketing companies may possibly insist on maintaining enhanced fuel price levels to offset previous losses and boost margins.)

The companies reportedly sold 190,838 units in May as compared to 176,432 units in the same month of 2010.

Further, The Society of Indian Automobile Manufacturers (SIAM) has trimmed its annual growth forecast for passenger cars from 16-18 per cent to 14-16 per cent, which can again be revised on sluggish demand persisting.

Worse, with flat steel—a key component in automobiles-- manufacturers raising the prices on account of high input costs, automobile manufacturers may further raise the prices to avoid a squeeze on margins. This would possibly be a drag on the industry momentum.

Ultimate Result: Natural rubber demand and prices would come down.

Factor 3: India output

The nation projects a 9 lakh ton natural rubber output in 2011, a growth of 5.8% that lags behind Malaysia’s output by just 75000 tons, said a media report.

According to ANRPC data, India’s Q1 production of rubber in 2011 calendar year has grown by 5.6% while in the coming quarter, the rate could likely be to the tune of 7.2%.

In the period between January and April 2011, India’s natural rubber output stood at 2.67 lakh tons, a 5.7% growth rate over 2.53 lakh tons for 2010.

In April, India’s Rubber Board had projected domestic consumption to the tune of 9.77 lakh tons mainly on automobile demand. But with sluggish sales in the offing, it is highly unlikely that there would be such a huge demand. This means rubber inventories in India would climb.

Ultimate result: Natural rubber prices would come down.

Factor 4: Chinese demand

According to a Business Line report, natural rubber cconsumption in China is seen rising 8.6% to touch 3.5 million tons with Q1 growth pegged at 5.2%. The country is expected to import 2.8 million tons, including compounds that have high natural rubber content.

Globally, exports from all countries are projected to increase10.3% in 2011 to 7.7 million tons against 7.4 million tons in 2010.

But Chinese growth story has many parallels with India’s. There too the fiscal tightening is happening. There too inflation is a problem.

This does not bode well for natural rubber prospects in China as well.

As published in: http://www.commodityonline.com/news/Four-factors-that-may-weaken-natural-rubber-prospects-39633-3-1.html

Are we at the dawn of GM rubber era?

It may sound unacceptable in the beginning; but as long as natural rubber is having nil alternatives or substitutes, support for Genetically Modified rubber will find resonance in the planting community.

Indian Rubber Growers Association had given full throttle support to GM rubber on account of global demand surge.

The statistics are in their favor: according to Rubber Board, the official agency entrusted to oversee rubber cultivation and production in the country, India’s domestic demand for rubber would touch 948,000 tons in the current fiscal as against 930,565 tons in 2009-10.

During the period stretching from April to January, India had consumed 789,230 tons of natural rubber when compared to 775,565 tons for the same period in previous year.

However, India’s natural rubber production for 2010-11 is estimated to be 893,000 tons. This would result in a deficit of 55000 tons.

This has pushed up prices in the domestic market. Prices went as far as Rs.250 a kilogram and bled the tyre manufacturing industry. They pummeled for import duty reduction which eventually brought down the duty on natural rubber to 8% from a high of 20%.

Still, as of the fiscal year’s end, the deficit runs.

The problem with natural rubber cultivation is that the crop is too sensitive to climatic changes and can be grown only in places where tropical climate prevails. Currently, there are only a few countries that grow rubber abundantly, with Thailand and Indonesia occupying top slot in production volumes.

In India, Kerala stands first in natural rubber production, accounting for about 90% of India’s production. But with space constraints prevailing, expanding rubber acreage is a major issue.

Tripura has been identified as another potential producer, but efforts to bring about production in the region will take time given many factors, including Maoist menace.

With demand soaring and acreage tearing the seams, the way out to address the situation is by enhancing rubber productivity and protecting the available resources from further deterioration.

No wonder, the GM debate has erupted. The Genetic Engineering Approval Committee of India had given approval for field trials for natural rubber in India past November.

This has kick started a fresh debate with the government of Kerala maintaining an anti-GM policy envisioned to keep the state GM-free.

There are fears expressed by various quarters that promoter elements introduced in gene manipulation of natural rubber may prove to be hazardous: NPT2 gene extracted from E.Coli bacteria and GUS reporter gene.

Experts point out that, unlike the major gene introduced to manipulate the structure and give out desired results—Mn-SOD (Manganese Super Oxide Dismutase); which is a natural component extracted from natural rubber—the NPT2 gene and GUS reporter gene do not promote any genetic changes and is absolutely safe.

These genes protect natural rubber from Tapping Panel Dryness and prolonged drought.

If the Maharashtra Government allows for field trials, India may soon see the same being carried out in a couple of months.

As published in:http://www.commodityonline.com/news/Are-we-at-the-dawn-of-GM-rubber-era-36381-3-1.html#